In this Round Investments review, we’ll check out this unique service to help you decide if it’s a good fit for your portfolio.
Round aims to give you an investment experience previously available only to the ultra-wealthy. But instead of needing tens of millions of dollars to get into a hedge fund or private equity fund, at Round you can start with as little as $500.
Portfolios are actively managed and built on around 2,500 underlying assets through partnerships with eight different actively managed fund companies. Investors get exposure to funds from Guggenheim, DoubleLine, Highland, Gabelli, PIMCO, Brookfield, Cohen & Steers and Aberdeen.
How Does Round Investments Work?
When you sign up for Round Investments, you get a typical managed portfolio experience. It takes less than 10 minutes to sign up. During the onboarding process, you’ll answer questions about your age, assets, investment goals, and risk tolerance. Based on that, Round will create a portfolio for you.
Because it is actively managed, you won’t get a fixed portfolio that just sits there. You can also ask the Round team to update your portfolio if you want to tweak how it’s put together.
Assets in portfolios include exchange-traded funds (ETFs), mutual funds and money market funds. Unlike robo advisors, Round doesn’t use only passive ETFs with rock-bottom pricing. So keep in mind you may pay more in fund fees (in addition to Round’s fee) than with passive robo-investing portfolios.
If you ever decide to make a withdrawal, it takes about ten days for Round to settle your sales and deposit funds into your linked bank account.
You can manage your account on the web or with a mobile app for iPhones. There is currently no Android version.
How Much Does Round Investments Cost?
Round charges fees that seem fairly reasonable for an actively managed portfolio. The company charges a 0.5% annual management fee, broken up into monthly charges. The fee applies only in months that your portfolio grows in value. If your portfolio goes down in value, you pay nothing that month.
The underlying ETFs, mutual funds and money market funds in Round accounts are actively managed and charge their own fees. These are higher than the low cost you see with index funds. But again, some investors find them worthwhile because they seek to beat the market and maximize their returns.
How Is Round Different?
Round Investments is similar to robo advisors such as Betterment, Acorns, Wealthfront and other digital-first investment platforms when it comes to the initial experience and the amount of involvement required of you. You’ll need to answer a questionnaire about your investment goals, history, and risk tolerance, as with the robo advisors. And you’ll also have the ability to “set it and forget it.”
However, at Round, your portfolio will include actively managed funds.
Active management costs more, and so does access to a human who can help manage your portfolio. Round charges a bit more than the field of robo advisors. Round’s pricing and service are most similar to Betterment’s top-tier plan, which gives you a human investment advisor and costs 0.4% per year. But again, the underlying assets are different.
However, it’s important that you consider whether active funds are appropriate for you. According to many years of analysis, active fund managers underperform their index benchmarks about 80% of the time. That’s why we often focus on low-cost index investing here at Investor Junkie.
There are many advocates for active funds that may be able to outperform indexing. Round offers unique diversification most investors can’t find anywhere else. After all, the firm is very confident in its ability to turn a profit.
Plus, unlike the robos, you pay an investment fee only in months that your portfolio earns a profit.
Round Investments Pros and Cons
Simple Asset Allocation
—Betterment teaches the ropes to invest and, more importantly, proper asset allocation.
Low Management Fees
—A flat-rate 0.25% annual fee for Betterment’s automated service. 0.40%/year for its advisor service.
Perfect for Young Investors
—Betterment makes investing accessible to young investors by automating the investing process.
—With tax and tax-deferred accounts at Betterment, it’s possible to minimize the taxes you pay while investing.
—An easy-to-use retirement planner tool, although not as comprehensive as Personal Capital’s Retirement Planner.
—If you have $100,000 or more to invest, you can use Betterment’s Flexible Portfolios to customize your asset allocation.
Analyze Accounts Beyond Betterment
—Betterment will now let you analyze the retirement savings accounts you have outside its platform. This aggregation can help you keep your portfolios straight and well maintained.
Personalized Advice Packages
—Betterment now offers advice packages created to answer your pressing financial questions, from getting started to retirement planning.
—Betterment lets you align your investments — including those outside the platform — to your specific financial goals.
Not for DIYers
—For advanced, high-net-worth investors who want to do it themselves, Betterment might not be the perfect fit. If you can roll your own asset allocation and know investment theory, there’s little need for using a service like Betterment. In addition, you may need tax advice, which Betterment cannot offer.
Cannot Asset-Allocate With External Accounts
—he biggest limitation of Betterment (and most other robo advisors) is it can manage only accounts at Betterment. While Betterment can display your 401(k) plan, it cannot create an overall asset allocation plan with your 401(k) in mind.
No REITs or Commodities
—Betterment does state these asset classes don’t increase returns, but from some research, we’ve seen they do decrease volatility.
Round is an investment service that brings regular people an experience that is often held for only very wealthy investors. Through actively managed portfolios, Round Investments aims to beat the market and the typical robo-advisor experience. The fee is a little higher than you’ll find with most robo advisors, but Round waives the cost in months that your portfolio doesn’t grow in value.
If you are looking for an actively managed investment experience where you can explain what you want, fund your account, and otherwise keep your hands off, Round Investments is designed specifically for you.
Written by Eric Rosenberg.
View the original article at here.